The company said in a blog post the market was expected to grow 32% quarter-on-quarter, removing doubts about any looming saturation in online retail.
According to the report, in the second quarter of 2018, online channels like Flipkart, Amazon, PayTM Mall, mi.com, OnePlus.com and other cornered 35% of the total smartphone sell-in to India which meant growth of more than 65% year-on-year to 11.7 million units.
Shipments that were sold directly through the vendors' websites totalled 9% of the total while retailers took the balance. Among the vendors, Xiaomi topped with 54% followed by Samsung (13%) and Huawei (7%).
"Online retail is seeing fresh vigour in India," said Canalys analyst TuanAnh Nguyen. "Walmart's acquisition of Flipkart and Alibaba's investment into PayTM has infused much-needed optimism in the industry, with smartphones being the most popular products sold on these platforms, benefitting directly from these investments.
"Consumer sentiment towards online purchasing has changed rapidly since the days of 'flash-sales'. Retailers like Flipkart and Amazon have transformed from being mere 'points of sale' to offering an array of 'additional services' such as device exchange, buy-back guarantees, after-sales service and even partnering with multiple financial institutions to provide 0% EMIs and cashbacks, piling immense pressure on local retailers who are unable to provide such perks to the consumer."
The report said India's widely independent retail network and fragmented offline retail had been a sticking point for most vendors who were trying to grow against dominant players like Xiaomi and Samsung.
"As of Q2 2018, 62% of smartphones were shipped to distributors in India and eventually resold to lower-tier channel partners and retailers. ASUS, whose Indian business was 100% distributor-led until Q1 2018, revamped its go-to-market and moved to 100% online-only within months and had since tripled its shipments sequentially in Q2 2018 and is bracing for a record performance in India in Q3 2018."
Other smartphone vendors have also realigned their strategies in recognition of the growing importance of these retailers.
"There has been a marked shift in the go-to-market of various smartphone vendors in India and online retail is a big part of that change," said Canalys research manager Rushabh Doshi.
"While it's difficult to shake Xiaomi's dominance, vendors have begun to build partnerships with leading ecommerce players and are challenging the status quo. OPPO's online-only brand RealMe promises to boost performance of the Chinese brand that has struggled to grow in recent quarters. Second-placed Samsung is taking the fight to Xiaomi by enhancing its 'value' through discounts and offers on ecommerce portals.
"Competition in India's smartphone market has begun to intensify again, with vendors wary of losing market share at the expense of shifting go-to-market strategies. But as the online market continues to grow, two players will emerge as the true winners - Amazon and Flipkart."
Chart: courtesy Canalys